"I suspect that whatever cannot be said clearly is probably not being thought clearly either" --- Peter Singer. (Mea culpa.) See the entry in my Quotes blog.

Monday, December 14, 2009

Constructing spectrum – lessons from the history of economics

“Spectrum” is powerful construct; most people assume such a thing exists, and this assumption has regulatory consequences. But how did it come into being? The stories that some social scientists tell about the construction of “the economy” by economics provide some insight.

Timothy Mitchell, for example, argues that the economy was created by economists:

The economy is a recent product of socio-technical practice, including the practice of academic economics. Previously, the term “economy” referred to ways of managing resources and exercising power. In the mid-twentieth century, it became an object of power and knowledge. Rival metrological projects brought the economy into being. [1]

In his chapter in Do Economists Make Markets? On the Performativity of Economics, Michel Callon puts it this way: “To claim that economics is performative is to argue that it does things, rather than simply describing (with greater or lesser degrees of accuracy) an external reality that is not affected by economics.” MacKenzie argues in his chapter of the same book that the Black-Scholes-Merton options pricing model not only helped traders price something that already existed; it also shaped it, since most traders ended up using the model, prices converged to what the model predicted. [2]

In the same way, economists who treat spectrum as an asset (see my post "Property rights without assets") are not simply describing an external reality; they are bringing something into being. One of the key tools in this process is metrology: for example, the gathering of GDP data brings into being “the economy” which is reified through numbers like the GDP. In the same way, the program to make an inventory of spectrum buttresses the spectrum-is-real perspective. (More on spectrum inventories in a future post.)

Implications

World views have consequences, and thus stakeholders. Those who have a stake in the existing spectrum-based regime gain from this view; questioning the validity of “spectrum” undermines the security of their rights and privileges. This applies not only to capitalists who own spectrum licenses, but also to progressives who base their claims to government supervision of radios on the public ownership of the supposed “spectrum asset”. On the other hand, if one thinks of radio regulation simply in terms of the operating rights associated with radios, then a much more dynamic regime can be imagined – one that would benefit both political and commercial entrepreneurs. A non-spectrum world view might also be attractive to current “spectrum owners” who are discontented with their rights. [3]

The political and engineering systems that have co-evolved with the spectrum concept have specific characteristics: largely static allocations of rights to operate defined in terms of fixed frequency ranges. More dynamic approaches don’t fit nicely. For example, Preston Marshall wants to guarantee the right to operate, but not exclusivity over one channel; he proposes to guarantee a licensee (along with others) an aggregate of access to sufficient frequencies to meet a certain amount of service. [4]

This is an approach that focuses on behavior, rather than the exclusive ownership of an asset. As I argued in "Property rights without assets", this is perfectly compatible with a property rights regime, since property rights don’t have to be based on an underlying asset.

The bottom line is that a spectrum-as-asset approach leads one to ignore elements, which leads to inferior rights design. Specifically, receivers have been ignored. If one thinks one’s job is to "carve up spectrum", then you don't have to worry about receivers. But when radio is considered as a system, the receivers determine interference just as much as transmitters, so one has to take them into account explicitly. By analogy: if you're deciding a land trespass case, you don't worry about whether farmer is grazing Holsteins or Friesians. But if you're deciding a trademark dispute, everything depends on what happens in the mind of the consumer (analogous to the receiver). [5]

[3] There is debate about the origin and extent of government property rights in spectrum; see for example the Introduction of William L. Fishman, “Property Rights, Reliance, and Retroactivity Under the Communications Act of 1934”, Federal Communications Law Journal, Vol. 50, No. 1. Fishman concludes: “It would probably be better, therefore, to say that the government regulates electromagnetic radiation in certain defined frequencies, rather than to say it regulates spectrum.”